When reviewing the week ending today San Diego mortgage rates were all over the place. Lenders raised rates, lenders lowered rates and sometimes they did both on the same day.  Yet, ahead of the most influential economic report released by the government (Unemployment) rates ended the week where they started!

The Bureau of Labor Statistics released the monthly Employment Situation report this morning.  This is the single most important piece of monthly economic data released to the market because consumer spending accounts for the vast majority of our economic growth. Market participants track jobs as a way to gauge consumer demand and economic activity.   If the number of unemployed Americans is moving higher, more people are without a job and therefore without stable income. This drains consumer demand and forces companies to keep costs low to stay in line with falling revenues. High unemployment is bad for stocks and as we know generally what is bad for stocks is good for bonds and San Diego mortgage rates.

This report gives us four different readings:

1. Nonfarm Payrolls -  totals the number of jobs lost or created in the prior month. Consensus Forecast: 50,000 jobs lost
2. Unemployment Rate – the percentage of able Americans who are out of work. Consensus Forecast: 9.8%
3. Average Hourly Earnings – shows the monthly change in the hourly wages. Consensus Forecast: +0.2%
4. Average Work Week – shows the average amount of hours worked weekly. Consensus Forecast: 33.7 hours

The results:

1. Nonfarm Payrolls: 36,000 jobs were lost. This was much better than expectations. January was revised worse from a first reported loss of 20,000 jobs to a loss of 26,000. December data was revised from -150,000 to -109,000
2. Unemployment Rate:  9.7%. Better than expected.
3. Average Hourly Earnings: 0.1%. worse than expected
4. Average Work Week : 33.8 hours, better than forecast.  This is important since the more hours worked leads to higher paychecks which gives workers more money to spend into the economy.

San Diego mortgage rates did not react well to this much better than expected jobs report. Following the economic data release, the 10 year Treasury yield rose and mortgage-backed security prices plummeted. Lenders who had already released rate sheet were forced to reprice for the worse (raise rates)  while other lenders delayed rate sheets until the bond market found stable ground. As the day progressed mortgage-backed security prices continued to decline which forced many lenders to reprice for the worse again. However, after the lunch hour, MBS prices then began to improve and eventually rallied enough to recover a good portion of early price losses. This allowed a few lenders to reprice for the better (lower rates) but not a many did so.

When the dust settled my wholesale lenders issued San Diego Mortgage rate sheets about where they were yesterday. The 30 year fixed rate remains in the 4.75% to 5.00% range for well qualified consumers.  Well qualified assumes a credit score of 740 or higher, loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.  Check back frequently for news affecting San Diego Mortgage rates.

The NAR released  Pending Home Sales data this morning.

From the release:

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in January, fell 7.6 percent to 90.4 from an upwardly revised 97.8 in December, but remains 12.3 percent higher than January 2009 when it was 80.5.

As we all know a signed contract is just the first step in a long process these day. The hard part is qualifying and closing!

Since activity spiked over the seasonally supportive spring and summer months, before topping out in October, there has been a drastic drop off in sales contract signings. In all reality the index has returned to pre-stimulus levels.

NAR Chief economist  Lawrence Yun says he expects a turn around late this spring into early this summer.  The Pending Home Sales index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that closed existing-home sales generally lag the Pending Home Sales Index by two months.

Given the decline in signed sales contracts in January and expectations for another slow month in February (because snow was worse in Feb), Yun’s outlook for a pick up in activity sometime in late spring/early summer makes sense…especially when you add in an anticipated spike in buyer demand as the tax credit draws closer to expiration in April.

Meanwhile my wholesale lenders are issuing rates sheet in a 4.875 – 5% range for a 30 year fixed mortgage assuming 80% ltv, 740 FICO and 1 point discount.

Standard and Poor’s released the Case Shiller home price index today leaving San Diego mortgage rates unchanged initially.  The index started with a base price of 100 in January 200 so an index value of 150 would mean  homes prices appreciated 50% since January 2000.

In last month’s release, which reported on home price changes in November, both the 20 city index and 10 city index fell 0.2% on a month over month seasonally unadjusted basis. Year over year, home prices were down 4.5% while the 10 city index fell 5.3%. Seasonal influences were again obvious in last month’s release. On an adjusted basis both the 10 city and 20 city were up 0.2% in November. Fall and Winter is a slow time of the year for housing, generally home prices have less support during this time of year.  December’s report had no change for the 20 city index compared to November and prices were down 3.2% for the year.

SEASONALLY ADJUSTED:

When adjusting the data for seasonal factors, which is how most economic data is published, home prices in 20 cities rose 0.3% in December. The table below summarizes.

On a seasonally adjusted basis, 15 cities grew or stayed the same in December.  On a non-seasonally adjusted basis, 5 cities improved or stayed the same.

Comments from David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s:

“As measured by prices, the housing market is definitely in better shape than it was this time last year, as the pace of deterioration has stabilized for now. However, the rate of improvement seen during the summer of 2009 has not been sustained,”

“In the most recent months we are seeing fewer and fewer MSAs reporting monthly gains in prices. Only four cities saw month to month improvements in December over November, when you look at the raw data.

“We are in a seasonally slow period for home prices, however, so it is not surprising to see better statistics in the seasonally-adjusted data, where 14 of the markets and the two monthly composites all rose in December.”

Housing is going through a seasonally slow time, so unadjusted price declines are not necessarily setting off alarm bells. What does increase skepticism about the health of housing is the fact that home buyer demand has really failed to react to outlooks for rising interest rates and the soon to expire home buyer tax credit (which might be extended again).

My wholesale lenders have issued rate sheets showing the 30 year mortgage rate to be in a range of 4.875-5% for well qualified borrowers. Well qualified assumes a minimum 740 FICO, 80% loan to value and the borrower paying all closing costs including 1 point discount. Check back frequently for news affecting San Diego mortgage rates!

San Diego Mortgage rates improved a few basis points yesterday due to a large sell off in the stock market. Our European neighbors are suffering through their own economic crisis and this is causing foreign investors to seek refuge in what is still considered the safest bet in the world:  US Treasuries.  As investors sell their stocks to buy bonds this so called “flight to safety” into the bond market helped mortgage-backed securities prices move higher and as MBS prices rise rates fall.

This morning the monthly unemployment report came out. This is the most important piece of economic data released to the market because consumer spending is what drives our economy and market participants track jobs as a way to gauge consumer demand and economic activity.   High unemployment is bad for stocks and good for mortgage rates.  The national unemployment rate came in at 9.7% which was better than expected but the crisis in Europe seems to have overshadowed this positive news leaving San Diego mortgage rates virtually unchanged.

My wholesale lenders issued rate sheets slightly better but mostly unchanged from yesterday afternoon.  The 30 year fixed rate mortgage remains in the 4.75% to 5.00% range for well qualified borrowers.  Well qualified assumes a FICO credit score of 740, a loan to value at 80% and pay all closing costs including one point loan origination.   Check back frequently for news affecting San Diego Mortgage rates!

San Diego mortgage rates improved modestly yesterday but my wholesale lenders did not issue rate sheets with any improvements due to several factors causing them to hold back.  Mortgage backed securities prices remained in a narrow range and most lenders were waiting for the end of the FOMC meeting today at 2:15pm eastern time. This was a major event that always has the potential to move interest rates in either direction and in fact it did! First let’s look at some other events this morning.

The Mortgage Bankers’ Association released their weekly applications index which covers over 50 percent of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts.  This gives economists a look into consumer demand for mortgage loans. More loan applications indicates an increase in home buying interest which is  a plus for the housing industry and economy.  Additionally, when rates are low an increase in applications implies consumers are refinancing for lower housing payments which can result in increased disposable income and this disposable income trickles back into the economy.

The report indicated a 3.3% decline in purchase application activity and a 15.1% decline in refinances from last week and in my opinion is primarily due to the recent tightening of lender guidelines making it harder for borrowers to qualify for a loan.  Keep in mind, San Diego mortgage rates are in the low 5% range and historically near a 50 year low. This tightening of guidelines is ahead of the Fed’s intentions to exit the MBS market in March and in fact will help the FED to exit the MBS market more smoothly.  In simple terms the weakness in the labor market and the refinance surge over the past year along with tighter guidelines has resulted in a smaller pool of qualified borrowers so loan production will be slow enough to allow the FED to exit without causing any major market disruptions.

Also today we had the New Home Sales survey showing sales in November fell by a much larger than expected 11% to an annualized pace of 355,000 sales.   Economists expected December’s report to post an increase in new home sales to an annualized pace of 370,000 sales.

The report indicated New Home Sales in December were much worse than expected. Sales fell 7.6% to an annualized pace of only 342,000.  Helping to offset the negative report was the prior month’s report was revised higher to 370,000. The seasonally adjusted estimate of new houses for sale at the end of December was 231,000. This represents a supply of 8.1 months at the current sales rate. An estimated 374,000 new homes were sold in 2009. This is 22.9% below the 2008 figure of 485,000 and a record low for annual new homes sales yet the median sales price of new houses sold in December 2009 was $221,300, an increase of $11,000. The average sales price was $290,600, an increase of $20,600.

Now onto the FOMC Statement. Drum roll please…………….    San Diego mortgage rates moved higher after the statement!!

There actually was not much difference from the December statement. The Fed  still showed a bias towards a positive economic outlook,  they didn’t show any change towards their stance on exiting the MBS purchase program in March but some district voters were against continuing a low interest rate policy citing beliefs that  the economy no longer needs such a low level of fund rates to support it.  The market didn’t like this and MBS prices quickly fell causing lenders to hike rates. 

My wholesale lenders issued rate sheets worse than yesterday. The 30 year fixed rate mortgage remains in the 5% to 5.25% range for well qualified borrowers. Well qualified assumes a credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs. Check back frequently for news affecting San Diego mortgage rates!

As of last Friday San Diego mortgage rates were at their lowest point of the new year as most lenders were offering 4.75% for a 30 year fixed rate loan.

This week has a number of rate influential data ahead. There is a meeting of the Fed , $118 billion in Treasury auctions, several housing market indicators, and a report on Gross Domestic Product.  All of these reports or events have the potential to move interest rates.

The only report today was Existing Home Sales. This report shows the number of sales closing in the prior month so today’s report covered  sales that closed in December 2009.  December’s sales came in at an annualized rate of 5.45 million units which was down from November’s annualized rate of 6.54 million units. This was the biggest one month drop since 1968. To add insult to injury the supply of homes rose from 6.5 months in November to 7.2 months supply in December and not surprisingly San Diego mortgage rates were a little worse today.

Tomorrow  we’ll see the S&P Case-Shiller Home Price Index that tracks the monthly change in home values across the country.  All eyes will be on this data since many believe that until home prices stabilize and start to increase, it will be very difficult for our economy to sustain growth.   Tomorrow also brings a Consumer Confidence report, a 2 year note auction totaling $44billion, and the beginning of the Fed’s two day meeting.

Wednesday brings more home sales data with the weekly Mortgage Bankers’ Associations Application index and New Home Sales followed by an auction of $42billion in 5 year treasury notes.  At 11:15am  Pacific, the Fed Statement will be released. This statement sets the Federal Fund rate and gives an economic outlook and announces any changes to existing programs such as the MBS buying program.

Thursday brings us Durable Goods Orders, Jobless Claims and $32billion of 7 year notes to be auctioned while Friday is the gross domestic product report (GDP), he initial estimate of fourth quarter growth and a report on consumer sentiment.

My wholesale lenders issued rate sheets  @ 1/8 to 1/4 worse than Friday.   The30 year fixed has risen to the 4.875% to 5.125% range for well qualified borrowers. Well qualified assumes a credit score of 740 or higher, a loan to value at 80% or less and an estimated one point fee.  Check back frequently for news affecting San Diego mortgage rates.

San Diego Mortgage rates have been holding in a sideways pattern to start off  this shortened week and didn’t react much to the NAHB/Wells Fargo Housing Market Index which showed a three point decline in the West echoing continued concerns about the poor job market and large number of foreclosed homes for sale.  This builder survey rates traffic of prospective home buyers, current sales and expectations of future sales and scores for each component are then used to calculate the index.  Any number over 50 indicates that more builders view sales conditions as good than poor. In January the West region index fell to 16, three points lower than December of 09 but up from a score of 5 in January of 09.

National Association of Home Builders Chief Economist David Crowe had this to say:

“Home buying conditions have rarely been as good as they are right now, but consumers are still waiting to see significant positive signs of improvement in employment and confidence, and this is slowing buyers’ return to the market” …  “Meanwhile, competition from foreclosed homes is also severely impacting new-home sales. That said, expected improvement in the job market this spring will help propel the housing recovery as we head into the prime home buying season.”

For the week ahead,  tomorrow  data picks up with the weekly Mortgage Bankers Associations Application Index followed by Housing Starts which will give market participants a look into the strength of the housing sector.   We also get a reading on inflation with the Producer Price index which tends to be a big mover of San Diego mortgage rates. Thursday brings us the weekly jobless claims and on Friday we have no economic reports.

My wholesale lenders issued rate sheets that were unchanged from Friday. The 30 fixed rate mortgage remains in  the 4.875% to 5.125% range for well qualified borrowers.  Check back frequently for news that affects San Diego mortgage rates!

San Diego mortgage rates moved slightly higher last week despite worse than expected employment data. There are no reports on the economic calendar today but the week ahead will have some items of interest that may move rates.  To help readers make sense of these reports and how they affect rates a good rule of thumb is that worse than expected economic data benefits fixed income securities like bonds and mortgage backed securities (MBS) while better than expected data benefits the stock market.

Throughout the week the government will auction @$75 Billion in new debt.  Continued strong demand for our nation’s debt will help to keep rates low! On Wednesday the Mortgage Banker’s Association will give us a look at their mortgage application index. This will help us gauge demand in the housing sector since the report distinguishes between refinance and home purchase applications.  The 3 reports most likely to move San Diego Mortgage rates are the retail sales and jobless claims reports on Thursday and the consumer price index on Friday.  Our economy is based on consumer spending and both retail sales and jobless claims speak directly to that factor. Higher retail sales and lower jobless claims means more Americans are working and spending!  On Friday the consumer price index will help gauge inflation which is perhaps the #1 factor the Fed uses when setting interest rates. If consumer prices are higher than expected the government will raise rates to slow things down.

My wholesale lenders issued rate sheets that were basically unchanged from Friday.  The 30 fixed rate is  in the 4.875% to 5.125% range for well qualified borrowers.  Well qualified assumes a credit score of 740, a loan to value at 80%  and one point loan origination.  You may elect to pay less in upfront fees, but you will have to accept a higher interest rate. Check back tomorrow for news affecting San Diego mortgage rates!

San Diego mortgage rates remain unchanged after the December employment report announced a loss of 85,000 jobs. This was much worse than expected and put the national unemployment rate at 10%.  This was in contrast to November of 2009 where 4000 jobs were created and that was the first month since December of 2007 that we actually gained jobs vs. losing jobs.  Ironically, bad news in the labor market translates to good news for San Diego Mortgage rates. Less jobs means less consumer spending which in turn keeps price inflation in check. This is good for rates because the first thing the Fed does when they fear inflation is jack up rates to slow things down.

So what can we take from this report? Although the economy has stabilized we are not out of the woods and it is too soon to say we are in recovery. My heart goes out to the families affected by December’s loss of 85000 jobs but had we seen a better than expected report it may have put pressure on the Fed to raise rates over inflation worries. When the Fed raises rates it leads to higher consumer costs,  lower consumer spending and a further slow down in our economic recovery.

Most of my wholesale lender issued rate sheets unchanged from yesterday. The par 30 year fixed rate is in the 5.0% – 5.125% range for highly qualified borrowers. Highly qualified assumes a credit score of 740, loan to value of 80% and pay one point loan origination.   Have a great weekend and check back Monday for updates on San Diego Mortgage rates.